Immigrants in the U.S. Are More Likely to Start Firms, Create Jobs: Study

However, many of the largest companies in the U.S. do not respond to the Survey of Business Owners. For this reason, the research team also analyzed the 2017 Fortune 500, identifying the citizenship and immigration status of founders of 449 of those companies.

Ultimately, the study showed that 0.83 percent of immigrants to the U.S. founded a firm from 2005 to 2010, while 0.46 percent of native-born U.S. citizens founded a firm in that time. That disparity — the 80 percent higher rate of firm founding — also held up among firms founded before 2005.

“Immigrants found more firms in every bucket,” Azoulay says. “They create more firms, they create more small firms, they create more medium-size firms, they create more large firms.” He adds: “It’s not the case that [immigrants] only create growth-oriented startups. It’s not the case they just create subsistence businesses. They create all kinds of businesses, and they create a lot of them.”

Azoulay emphasizes that the study, focused on the empirical facts about business creation, does not explain why immigrants tend to found firms more often. It may be that some immigrants, finding it hard to access the U.S. workforce as employees, may start service-type businesses instead.

Alternately, some immigrants to the U.S. arrive as students, stay in the country, and found high-growth, high-tech startup firms. The breadth of the overall trend suggests there are likely multiple such scenarios in play at once.

“There can’t be just one explanation,” Azoulay says. “There is probably a different story for the firms that eventually grow to be large, and for the firms that start small and stay small.”

Facts for a Larger Discussion
As the researchers note, defining whether a firm’s founders are immigrants is not always a straightforward matter. Some firms have multiple founders, representing a mix of immigrants and native-born people.

To address this issue, the scholars tested multiple ways of classifying firm data. In one iteration of the analysis, they allocated credit for firm founding proportionately among founders. In another iteration, they only credited a firm as being founded by an immigrant if the “lead” founder was an immigrant. Still another round of analysis defined a firm as being immigrant-founded if any member of the founding team was an immigrant. All these methodologies yielded the same large-scale trend.

Indeed, as the authors write in the paper, “Immigrants appear to play a relatively strong role in expanding labor demand relative to labor supply, compared to the native-born population.”

Azoulay notes that debates over immigration policy may have many dimensions and are not always going to revolve around the economics. Still, when it comes to that economic impact, and specifically to the issue of job creation and availability, Azoulay hopes the study will provide some baseline data points for public consumption.

“Any discussion needs to start from a common set of facts,” Azoulay says.

Peter Dizikes is the social sciences, business, and humanities writer at the MIT News Office. The article  is reprinted with permission of MIT News.